Report on the

“Manzana Insurance: Fruitvale Branch (Abridged)”

In fulfilment of Course:

Operational Management - I

Date of Submission:

23/01/2020

Submitted by:

Group 8

P19054 - Nishant Thacker

P19050 – Srikar Maddula

P19047 – Akshita Shrivastava

P19029 – Janastus Louie

P19026 – Ashish Kushwaha

P19034 – Ameen Sabik

 Process flow diagram:

Underwriting
teams-3 (2
Thkwwkj
Originating agents
members each)
Territory-1
Distribution clerks(4)
WIP (16) Rating (8) WIP- 11 Policy rating (5) WIP=3
Underwriting Avg time - 0.913
Originating agents Avg time = 1.173
Avg time: 0.683 hrs/rqt teams-3 (2 hrs/rqst
Territory-2 members each) hrs/ rqst
Throughput = 23.43 Throuputrate- 3.28
reqst/hr Throuput= rqst/hr
9.38rqst/hr

WIP (52)
Originating agents
Territory-3 Avg time: 0.473
hrs/rqst

Throughput=
109.94 rqst/hr

Throughput rate calculation using the Little’s Law

Situation Analysis:

Manzana insurance is a property insurance firm based in California. The case discusses
mainly about Fruitvale branch. The problem currently is increasing competition with Golden
gate company. The profitability is declining for last 2 quarters due to increased turn around
time and improper scheduling.

Major concerns:

1) High turn-around time: this is a big problem as insurance agents are moving away
from Fruitvale branch. The turnaround time is currently 6 days, compared to 1-day
guarantee of GG.
2) Renewal losses: renewals are decreasing due to 44% late renewals and renewal losses
are about 47%. This is very negative due to only 15% losses of renewals by golden
gate.
3) Operating procedure: Renewals are not given preference against RAPs and RUNs
requests. This procedure making operating procedure inefficient.
Turnaround time:
Here turnaround time is total time taken to complete from originating agents to the policy
distribution. Agents request end users to buy policies based on the turnaround time pitching.
If the turnaround time is less, people prefer to buy the policies.
Manzana is overshowing the TAT using the 95% standard completion time (SCT)

With current capacity they are

already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
Using 95% SCT is not a good
measure to calculate the TAT
because of the high variation
in
processing RAPs and RUNs.
Appendix 2 shows the
calculation for TAT using the
mean time [from Exhibit 4]
which gives
the TAT of 4.7 days. Through
put time for RERUNs alone is
3.2 days whereas for RAPs
RUNs
and RAINs it is less than 1 day
With current capacity they are
already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
Using 95% SCT is not a good
measure to calculate the TAT
because of the high variation
in
processing RAPs and RUNs.
Appendix 2 shows the
calculation for TAT using the
mean time [from Exhibit 4]
which gives
the TAT of 4.7 days. Through
put time for RERUNs alone is
3.2 days whereas for RAPs
RUNs
and RAINs it is less than 1 day
With current capacity they are
already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
Using 95% SCT is not a good
measure to calculate the TAT
because of the high variation
in
processing RAPs and RUNs.
Appendix 2 shows the
calculation for TAT using the
mean time [from Exhibit 4]
which gives
the TAT of 4.7 days. Through
put time for RERUNs alone is
3.2 days whereas for RAPs
RUNs
and RAINs it is less than 1 day
With current capacity they are
already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
Using 95% SCT is not a good
measure to calculate the TAT
because of the high variation
in
processing RAPs and RUNs.
Appendix 2 shows the
calculation for TAT using the
mean time [from Exhibit 4]
which gives
the TAT of 4.7 days. Through
put time for RERUNs alone is
3.2 days whereas for RAPs
RUNs
and RAINs it is less than 1
day.
With current capacity they are
already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
Using 95% SCT is not a good
measure to calculate the TAT
because of the high variation
in
processing RAPs and RUNs.
Appendix 2 shows the
calculation for TAT using the
mean time [from Exhibit 4]
which gives
the TAT of 4.7 days. Through
put time for RERUNs alone is
3.2 days whereas for RAPs
RUNs
and RAINs it is less than 1
day.
With current capacity they are
already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
Using 95% SCT is not a good
measure to calculate the TAT
because of the high variation
in
processing RAPs and RUNs.
Appendix 2 shows the
calculation for TAT using the
mean time [from Exhibit 4]
which gives
the TAT of 4.7 days. Through
put time for RERUNs alone is
3.2 days whereas for RAPs
RUNs
and RAINs it is less than 1
day.
With current capacity they are
already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
With current capacity they are
already processing
approximately 39 policies per
day with a
WIP of 82 policies. This
means a turnaround time of
approximately 2 days (by
Little’s Law).
By overstating their
turnaround time, Fruitvale is
sending wrong signal to its
agents, which
in turn is hurting its business.
With current capacity company is processing 39 policies per day with a WIP of 82 policies.
Turnaround time of the company is 2 days (by Little’s Law). Manzana by showing their
turnaround time high, giving the not right signal to the customers, this is the reason which is
decreasing the business.
Using 95% Standard completion time is not a very good measure to give the Turnaround time
due to the high variability in calculating RAPs and RUNs.
TAT by mean time [from Exhibit 4] is 4.7 days.
RERUNs alone is 3.2 days
RAPs RUNs and RAINs is < 1 day.
Policy
Attribute Distribution Underwriting Rating Writing
Arrival Rate (requests/day) 39(22+17) 39 39 29
Weighted Avg processing time
(min/rqst) 41 28.4 70.4 54.8
Weighted Avg processing time 1.1733333 0.91333333
(hr/rqst) 0.683333333 0.473333333 3 3
26.4866666
Total time required (hours) 26.65 18.46 45.76 7
Workers 4 3 8 5
Hours available 7.5 7.5 7.5 7.5
 Capacity available per day
(hours/day) 30 22.5 60 37.5
Capacity available per day (mins/day) 1800 1350 3600 2250
76.266666 70.6311111
Capacity utilization (%) 88.83333333 82.04444444 7 1

Renewals delay and loss of revenue

In the initial stage of 1991 alone Fruitvale have loose 926 [reference exhibit-7] renewals
value is $5,745,830 [$6205 X 926] during the course of the year which impacted the bottom
line profits.
Manzana company profit has started decreasing from the last quarter of 1989 and started
decreasing every quarter from that year.
Territory 1 Territory 2 Territory 3
Renewals lost 403 227 296
RERUNS received 636 227 296
Total lost % 63% 27% 49%

2 – Renewals delay and loss of

revenue
In first half of 1991 alone
Fruitvale have lost 926
[Exhibit 7 of case] renewals
worth
$5,745,830 [$6205 X 926] or
revenue over the year which
directly impacts its bottom
line.
This decline in branch profit
has started from the 4
th
Quarter of 1989 [Exhibit 5]
and starting
from then on the branch is
losing money every quarter. In
fact it has made losses during
1
st

($174k) and 2
nd
($121k) quarter of 1991.
Among lost renewals Territory
1 renewals lost percentage is
highest in first half of 1991
Standard Operating Procedure :
FIFO – First In First Out is the company policy. But RUN’s and RAP’s process are given higher
priority, because of the associated commission with them. Due to this, RERUN’s process is suffering
significantly. The throughput times for each request through all the departments are given below,

RU RAP RAIN RERUN

N
Total throughout in days for ind requests (SCT 95%) 0.7 1.1 0.8 5.5

RU RAP RAIN RERUN

N
Total throughout in days for ind requests (mean time) 0.4 0.6 0.5 3.2

RU RAP RAIN RERUN

N
Total throughout in days for ind requests (Min time for 0.3 0.4 0.3 1.9
rating and policy writing)

Another problem is that the workload of the 3 underwriting teams is unbalanced. From Exhibit 7 , we
could see clearly is that Underwriting Team 1 , is running at a very high utilization compared to
Underwriting 1.

Territory 1 Territory 2 Territory 3

Requests (H1 of 1991) 1867 1657 1430
Per day (120 days) 15.6 13.8 11.9
Time required (28.4 min weighted avg) 441.9 392.2 338.4
Total time available 450 450 450
Utilisation 98% 87% 75%

High service response variability:

In Exhibit 4, we could find that variability in servicing times is showing an interesting
pattern. The underwriting department shows highest variability. (Especially for RERUNs)
One of the important reason could be is lack of formal procedures, hence standardising the
process will improve overall service time.
 RUN RAP RAIN RERUN
Distribution 44.8% 49.8% 21.1% 22.1%
Underwriting 73.4% 64.5% 51.8% 105.9%
Rating 27.2% 21.0% 24.3% 12.8%
Policy writing 14.5% NA 15.9% 19.0%
Organisation structure and Compensation policy
Prioritizing the RUNs and RAPs compared to the RAINs and RERUNs whereas rating
department and policy writing are in line according to the policy which is using FIFO.
Salary/plus scheme is following by the company to retain the senior employees, but it is
backfiring the company. Incentivizing the senior employees to get new policies and paid
bonus of 25% to the new policy above their required rate. This is making the employees
priorities down for the RAINs and RERUNs which is impacting their business.